Aoyama Sogo Accounting Firm

～TheInnovation Speed Quality

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C E O ’ sVol.31

2024.3.29

C o l u m nBringing Innovation to FundInformation
First and foremost, thank you for your continued
business and cooperation.
Our newsletter began in July 2021 and last monthmarked our 30th volume. With this, our company
pressured me to finally write an article. I would like totake this opportunity to briefly explain one of ASA
Group’s main focuses right now, which was explained atthe “2024 Real Estate Fund Forum” hosted by SogoUnicom on March 6. Thank you to those that attended.
As you may be familiar, global investors are placing
their money in Japanese real estate because of thecheap yen, low interest rates, and stability of themarket.
Investors must make investment decisions swiftly
and accurately in such a market dynamic. The key thenbecomes obtaining information as fast as possible.
To review asset performance, reporting with accuracy
and speed becomes crucial. Meanwhile, regulations formoney laundering and cross-border transactions havecomplicated the landscape. The industry also faces alabor shortage, much like other industries.
Considering these unique challenges, the key
becomes efficiently relaying high quality information ofreal estate performance from property managers toaccounting firms, then to asset managers, fundmanagers, and finally to investors.
Over the past 25 years, ASA Group has gained
experience through accounting, tax, and administrationof investment vehicles, and with it we are developing a
streamlined flow of information.

For property managers, this translates to moreresources that are expendable for operations, leasing,and value-added services.
For accounting firms, it means producing reports withhigh efficiency and high quality, as well as getting themto our clients with speed and accuracy.
For asset and fund managers, this means having
more time for investor support and investment strategy.
I heard that the labor shortage also compounds on
the issue of companies and funds not being able toconcentrate on value-added work.
As ASA Group, we provide not just our core servicesof tax, accounting, and administration, but through PMand AM support services, we are able to understandclient needs and analyze results. We are looking toexpand our capabilities by producing reports that aredirect and valuable to investors.
We are currently developing and running an internal
system called WATT, to organize flows of information
efficiently and to collect and output information. WATT
maps and collects information from various formats,including accounting data, property data, and bank

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Aoyama Sogo Accounting Firm

～TheInnovation Speed Quality

latest in alternative investments～

C E O ’ sVol.31

2024.3.29

C o l u m n(continued)account data, then can output information in differentformats. Through actual projects, we have gained
substantial know-how of mapping and producing
information in different formats.
With so many systems that already exist, you might
think this new system may instead add to the workload.
To be clear, the system is not meant for distribution,
but solely to “manage an optimal flow of information”.
WATT is merely a tool to that end. By extracting data,preparing reports, and aggregating/analyzing data toassist our clients, this “new structure” is meant todeliver high quality information efficiently and swiftly.
The structure itself will not be packaged and sold, butrather to be used to tailor services for each investor andasset manager for each investment.
Please reach out to us on ways we can free up more ofyour time, so that you can focus on fund performanceand investment strategy and less on day-to-day matters.
by Masaki Aguni, CEOJ a p a n

R e a lE s t a t e

Logisteed. Total acquisition price was 108.26 billion yen.
The seller is Logisteed (previously Hitachi Transport,Headquarters: Chuo Ward), the investee of KKR.
These transactions unfolded after KKR and its
subsidiary KJR Management proposed a CRE carve-out
to Logisteed. The sales price of all Logisteed properties
is over 212.6 billion yen. Logisteed has transitioned toan asset-light business model much like other logistics
companies and making growth investments, with theintent to go public again as a global logistics provider”(from February 16, 2024, Nikkei Real Estate MarketReport)
IFF was originally a Mitsubishi Corporation REIT, butin 2022, private equity giant KKR acquired the assetmanagement firm. At the time, the acquisition price wasthought to reflect the potential synergy with KKR’s
existing business. The latest deal is a clear example ofthis synergy.

IFF acquires logistics facilities fromLogisteed in Carve-out

In 2023, KKR acquired and took Hitachi Transport(currently Logisteed) private. With this CRE carve-out that
separates the property from the company, KKR is expected
to improve enterprise value and re-list the company to exit.

I would like to comment on the news of the recent
sale between IIF (Industrial & Infrastructure FundInvestment Corporation) and Logisteed.

Also, IFF, which is a REIT would hold the property
permanently in a sale-and-leaseback deal, making it theowner of the property in a CRE carve-out and receiving
stable long-term income and growth.

“[Sale] IFF acquires 210 billion yen in total. On February
15, U.S. IFF, Kohlberg Kravis Roberts (KKR) agreed toacquire 28 logistics facilities and leasehold land from

It’s possible that other PE funds holding REIT asset
managers will become active in similar ways in the future.
by Shigeru Hirai, Business Management GroupCopyright(c)2024 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

～TheInnovation Speed Quality

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U . S .

R e a lVol.31

2024.3.29

E s t a t e

The Competition for New York City’s
Prime Real Estate

Why Storefronts are still important for Luxury
BrandsFor both retail stores and offices, the physical location
can be representative of the face of the company. For
example, Aoyama Sogo moved to Okura Prestige Tower
not only for the earthquake-proof build, but for Okurabrand’s heritage and quality to represent the face of ourcompany.

For a luxury brand, a storefront is especially important.
As evidence, Prada and Gucci’s parent company
acquired properties at $425 million and $963 million,respectively.
One reason behind such acquisitions is the strong
financial performance of luxury brands. For example,LVMH Group (record sales €86.2 billion, +20% YOY) andHermes (record sales €13.4 billion, +20% YOY) had
tremendous 2023 results. So instead of continuing topay high rents, more companies are deploying theirabundant cash to purchase prime real estate from theirowners. Acquisitions are also active in places in Beverly
Hills and Paris. There are also cases where companies
issue corporate bonds in such acquisitions, so they canbe financed at a lower interest rate than standard bankloans.
While ecommerce is still growing, there has been arevamping of malls and storefronts in the city. Perhaps
these efforts combined with revenge spending
contributed to record sales for companies like LVMHand Hermes. For the foreseeable future, it seems thatthe retail store in prime locations will continue to be avital component for the brand power of luxury brands.
by Yuichi Totani, Client Relations GroupAn area that’s highly concentrated with companies
and brands also brings significant attention wherebusinesses can thrive. While digitalization progresses,
the importance of matching a face (of a company) to aplace will continue.

Sara Cultural Centre (Photo: Jonas Westling)
Copyright(c)2024 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

～TheInnovation Speed Quality

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Ta xVol.31

2024.3.29

U p d a t e[Tax Reform] Meals Amountincluded in Entertainment Expenses(“the 5,000-yen rule for mealsexpense”)
In the 2024 tax reform’s special tax measure for “nondeductible entertainment expenses”, the amount formeals excluded from the scope of entertainment
expenses will be raised to 10,000/person and under(current: 5,000 yen and under).
In this case, entertainment expense is defined as“meals, entertainment, and other confidential expenses
spent by a company to entertain, serve, care, gift, andother such acts towards a client, supplier, or otherperson related to the business” (interpreted to include“towards directors, employees, shareholders.” Meals
are defined as “expenses for meals and other similar
acts for entertainment” (excludes those towards
directors, employees, and relatives of such persons).

For the consumption tax treatment for this threshold
amount, each company shall follow their accounting
treatment for consumption tax. For tax-excluded
method, “the pre-tax amount” is used, and for the taxincluded method, the “after-tax amount” is used. The
amount to consider may also include whether therestaurant or store is a qualified invoice issuer or not.
Either way, this reform of threshold amount for meals
included as entertainment expenses (perhaps it should
be called the “new 10,000-yen rule for meals expense”)
is a huge reform since the system was implemented in2006. Companies may also have to revise business
expense policies.
by Masaaki Kidokoro, Knowledge GroupSpecifically, the “amount of meal expenses to beexcluded from the scope of entertainment expenses”,
will be applied when the “the total expenses incurred
for the meal divided by the number of participants ( =per person amount)” is below the stated amount. If theactual amount exceeds this stated amount, the entire
amount (not just the excess amount) will be excluded
from the omission rule.

Copyright(c)2024 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

～TheInnovation Speed Quality

latest in alternative investments～

E d i t o r ’ s

Vol.312024.3.29

A f t e r w o r dAt the Academy Awards, Takashi Yamazaki’s “Godzilla1.0” won Best Visual Effects and Hayao Miyazaki’s “TheBoy and the Heron” won Best Animated Feature Film.
I’m incredibly happy to see that Japanese technology
and storytelling was recognized. In particular, Godzilla
1.0 was made using technology called VFX that createdvisuals that outshined even the biggest Hollywood films.
Japanese business as a whole is often said to be
domestic-oriented, and that more effort is needed tosell globally. For tax and accounting and the fundadministration business, this is no different, as we must
engage in business with a global mindset. Just like VFX
did for film, Japan has plenty of technology that cancompete with the world. It no longer seems like a fairy
tale to not only grow business within the country, but
on a global scale as well.
by Jun Murata, Corporate Officer

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